The Minister of Finance, Budget and National Planning, Zainab Ahmed, disclosed in Abuja on Wednesday during the public presentation of the details of the 2022 Appropriation Bill, signed by the President, Muhammadu Buhari that the Federal Government spent N4.2tn on debt servicing between January and November 2021.
The N4.2tn represents 76.2 per cent of the N5.51tn revenue generated during the period under review.
The presentation, which included an overview of the 2021 budget implementation, revealed that oil revenue contributed N970.3bn to the total revenue generated within the period, while non-oil tax contributed N1.6tn. Other revenues amounted to N2.8tn.
Ahmed said, “As of November 2021, aggregate revenue was N5.51tn which is 74 per cent of target. Out of this sum, the share of oil revenues was N970.3bn, representing 53 per cent performance of the prorated sum in the 2021 budget while the share of non-oil tax revenues was N1.62tn, about 118.8 per cent over and above the target.
“Companies Income Tax and Value Added Tax collections were N718.58bn and N360.56bn, representing 115 per cent and 165 per cent, respectively of the prorated targets for the period. Customs collections were N542.11 billion, 104 per cent of the target.
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“Other revenues amounted to N2 .80tn, of which independent revenues was N1.10tn and government-owned enterprises retained revenues was N1.20tn.”
The minister noted that the government spent N12.56tn out of the N13.57tn prorated budget, within the review period. She added that the performance was inclusive of expenditure estimates of the GOEs but exclusive of project-tied loans.
The total expenditure constitutes N4.20tn spent on debt servicing, N3.02tn on personnel cost, including pensions, and N3.2tn expended on capital projects.
She however stressed that the figures for 2021 were provisional and, as such, subject to updates and reconciliation.
Ahmed disclosed that the total revenue generated by the government within the 11-month period was N5.51tn while expenditure stood at N12.56tn.
This resulted in a budget deficit of N7.1tn, which is N1.14tn higher than the prorated budget of N5.9tn for the period under review.
She also revealed the items used by the Federal Government to finance the 2021 budget to include multilateral and bilateral loans valued at N369.93bn and new borrowings of N6.68tn.
Ahmed said that the N6.68tn was N1.65tn higher than the N5.05tn earmarked for fresh loans in the 2021 budget.
While defending government borrowing and the country’s debt level, the minister insisted the country had a revenue challenge, and not a debt problem, adding that the debt level was still within sustainable limits.
She said, “This is to restate, that the debt level of the Federal Government is still within sustainable limits. Borrowings are essentially for capital expenditure and human development as specified in Section 41(1)a of the Fiscal Responsibility Act 2007.
“Having witnessed two economic recessions we have had to spend our way out of recession, which contributed significantly to the growth in the public debt.
“It is unlikely that our recovery from each of the two recessions would have been as fast without the sustained government expenditure funded partly by debt
“To compound matters, the country has technically been at war with the pervasive security challenges across the nation.
“This has necessitated massive expenditures on security equipment and operations, contributing to the fiscal deficit; defence and security sector accounts for 22 per cent of the 2023 budget.
She revealed that Nigeria’s budget deficit to Gross Domestic Product stood at -4.3 per cent, while Debt/GDP ratio was 30 per cent as of November 2021, one of the lowest in Africa.
Conversely, Nigeria’s debt servicing to revenue ratio rose to 76 per cent as of November 2021, the highest among top economies in Africa, she said.
“This is proof that what we have is not a classic debt sustainability problem, but a revenue challenge”, she added.
Experts, however criticized the government on the high debt servicing to revenue ratio, which has made borrowing too costly for the country.
For instance, the Chief Executive Officer of SD&D Capital Management, Idakolo Gbolade, said, “The minister is just trying to window-dress the problem that Nigeria has. I am very happy that she acknowledges that we have a revenue problem.
“The issue of not having a debt problem can be ascertained because they are using the debt to GDP benchmark. But our debt service to revenue is abysmal.”
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According to him, the rate of borrowing is unsustainable and there is a need for the government to make necessary adjustments before the country goes into a severe problem with its debt.
“Our borrowing is not sustainable. If we don’t increase our revenue, it would get to a point where we will use all our accruable revenue to service debt. Nigeria is getting towards that if something is not down urgently.
“What we need to do is to cut our cloth according to our coat. We need to reduce borrowing and ensure that we fund critical projects. If we don’t do that, we will go into a serious problem, going forward.”
Earlier, the World Bank had said Nigeria’s debt was vulnerable and costly. It added that the country’s debt was at risk of becoming unsustainable in the event of macro-fiscal shocks.
During an interview with Channels Television on Wednesday, President Muhammadu Buhari stressed that the country takes loans based on necessity, adding that the loans are needed to drive infrastructural development in the country.
“We have achieved some successes and people have to measure the success vis-à-vis the problems when we started. We have to build infrastructure, and we have identified the infrastructure we need. We have to make the railways work. We have to make the roads.”
The president added that Nigerians need to appreciate what his regime has done.
